Crude Palm Oil Weekly Report April 13, 2014

0

Technical Analysis for FCPO / FCPO Daily Chart Source: BursaStation Professional

Malaysian palm oil futures settled 1.6 per cent lower for the week on Friday as industry stocks data from Malaysian Palm Oil Board (MPOB) shocked the market with the report of a slight increase in inventory levels.

However, comparative oils and crude oil has supported the market as price managed to bounce from a low level. FCPO settled at 2,615; down 43 points from 2,658 last Friday.

Volume decreased to 175,667 contracts compared to last week at 231,906 contracts due to Qing Ming festival. Open interest based on this Thursday decreased to 187, 623 contracts compared to last week at 188,715 contracts.

According to MPOB’s report, production had increased 17.34 per cent to 1.497 million tonnes, which was above expectation of an increase to 1.392 million tonnes.

Inventory had increased 1.86 per cent to 1.688 million tonnes which was above expectation of a decrease to 1.577 million tonnes. Export decreased to 1.244 million tonnes which was lower than expectation of a decrease to 1.230 million tonnes.

Cargo ITS reported a 4.4 per cent rise for the first 10 days of April where export figures were reported at 306,765 tonnes compared to the first 10 days of March at 293,879 tonnes. Cargo SGS reported a 3.2 per cent rise in export figures at 306,605 tonnes for the first 10 days of April compared to the first 10 days of March at 297,064 tonnes.

Despite the rise on the supply side, weather experts from the US have recently raised the probability of an El Nino type of phenomenon in the second half of 2014 as the chance for it to strike by the Northern Hemisphere summer has increased to above 50 per cent.

According to Kenanga Investment Bank analyst Alan Lim in a note, despite export being weak, he maintained his positive view on FCPO price in the mid-to-long term as sustainable demand from the biodiesel industry, stable food demand and the short-lived bumper soybean crops from South America which might last till the end of May.

Moreover, traders were expecting export to rise up as the Ramadan festivals are coming soon. Throughout the week, spot rate ringgit strengthened till 3.2155 on Thursday before it closed for the week at 3.235.

Most Asian currencies including the ringgit strengthened as US job outlook had not impressed the Federal Reserve which prompted the Feds to not hike interest rate in the short term period. The strengthening in ringgit was also one of the many reasons why FCPO fell to as low as 2,572.

 

Technical view  

From the chart, price continued to fall down and meet the EMA 200 day moving average line (orange) and since then price remained supportive at that level before it bounced up and closed for the week at 2,615.

Based on the circled part in the graph, we suggest traders to really focus on the price action as it is now trading sideways or flat.

Should price go up, traders are advised to monitor the 2,670 level. We also drew the Fibonacci Projection line so that traders are able to see the target of the rebound. Since it’s in a consolidation mode, we also have to take account that should price fall, it may challenge the 2,570 level and below, which may even drop to the 2,520 to 2,485 level which has not been seen in months.

Currently, we still maintain our positive view on FCPO and we are observing when the correction since March 11, 2013 will end as candlesticks formed during Wednesday to Friday suggested that price may already found its support and buyers may focus on coming back to the market as sellers seem to be exhausted.

However, stronger support could also mean that should price managed to go below 2,570 level, it also means there is another potential of a drop to as low as 2,485. For the coming week we pegged our important support levels at 2,580-75, 2,520 and 2,485. For our resistance levels, we pegged important ones at 2,670-80, 2,740 and 2,800.

 

Major fundamental news this coming week

MPOB, ITS and SGS report on April 15 (Tuesday).

 

Oriental Pacific Futures (OPF) is a Trading Participant and Clearing Participant of Bursa Malaysia Derivatives. You may reach us at www.opf.com.my  Disclaimer:  This article is written for general information only. The writers, publishers and OPF will not be held liable for any damage or trading losses that result from the use of this article.